Brown: Medi-Cal expansion could hit state budget to tune of $4 billion a year

SACRAMENTO (AP) — Expanding the state's Medi-Cal program to meet new federal guidelines could add up to $4 billion a year in costs at the same time California is implementing federal health reform, potentially putting its budget "right out of whack," Gov. Jerry Brown said Thursday.

In a telephone interview with The Associated Press, Brown said his administration is seeking federal waivers for some of the proposed expansions to California's health care program for the poor. The changes could add more than a million people to the 7.7 million already served under the state's version of Medicaid.

"We're very interested in seeing everyone — as many people as possible — covered, but I am very concerned that negotiations in Washington could have huge negative impacts in California by loading billions of dollars of new and unexpected costs that will just take our budget and put it right out of whack," the Democratic governor said.

Supporters of the expansion said the $4 billion figure was grossly inflated.

States must commit to fully expanding coverage for individuals who make up to about $15,400 a year, or about 138 percent of the federal poverty limit, in order to tap more generous funding. California is one of many states that have yet to decide whether to expand their programs.

In California, the change would add between 1 million and 1.4 million people to Medi-Cal. The state is also in the process of moving 900,000 children to Medi-Cal from the health insurance program known as Healthy Families.

"We certainly are going to come out with a program that will chart a path to expand Medi-Cal eligibility, but the federal government has to give us the tools so that we can temper the rising costs in health care," he said.

Brown said adding more people to the rolls goes beyond what the state has available to pay for it "unless we can get waivers and law changes that will allow us to deliver a health care with a more, let's say, judicious, business model."

Anthony Wright, executive director of the consumer health group Health Access, said the $4 billion figure is far too high, and that most estimates have put the cost to California in the low hundreds of millions over several years.

"The Medicaid expansion should be seen as a huge benefit to our health care system and our economy. With a very small investment we could bring billions of dollars into our health care system and our economy," Wright said. "To look at the cost side without the huge benefit is almost misleading."

Medicaid, the federal-state health insurance program for the poor and disabled, is one of two primary ways in which the Affordable Care Act will expand coverage for people who currently have no health insurance. California has been aggressive in setting up its new health insurance exchange, which will make subsidized private health insurance available starting in 2014.

Under the law, the federal government will cover 100 percent of the cost for the first three years of the expansion, gradually phasing down to a 90 percent share — still a far more generous match than the 50 percent states have traditionally received. There's no deadline for states to decide, and they can try the expansion and later cancel it if it doesn't work out.

Two nonpartisan groups, the Kaiser Family Foundation and the Urban Institute, said in a recent report that states can expect to receive $9 in federal funds for every $1 they spend on the expansion.

But some governors worry that Medicaid is already a strain on their state budgets. The Supreme Court in June gave states the right to opt out of the expansion.

A report released this week by the National Conference of State Legislatures found that rising health care costs are boosting state Medicaid costs, and that spending on public health programs is over budget in 10 states, compared with six at this time last year.

Texas' Medicaid program was underfunded by $4.3 billion in its 2012-13 biennial budget, West Virginia estimates it will be over budget by $180 million next year, and Maine noted that despite declining caseload, Medicaid spending continues to increase, the report stated.